RBI backs MDR on large-value UPI transactions, says users will pay no fee

The Reserve Bank of India (RBI) has backed the introduction of a merchant discount rate (MDR) on large-value UPI transactions, saying the move is important to ensure the long-term sustainability of India’s digital payments ecosystem.

 

The government on Tuesday introduced a 0.4 per cent MDR on Unified Payments Interface (UPI) payments above ₹2,000 to merchants, with the fee capped at ₹300 for payments of ₹75,000 and above.

 

In a post on X, the central bank said the move would help UPI continue to scale and innovate while serving consumers and businesses across the country.

 

The RBI said a fair and appropriate distribution of MDR across ecosystem participants would support continued investment in technology, infrastructure and acceptance networks. This, in turn, could enable wider UPI acceptance, deepen the customer base and support sustained growth in transaction volumes.

 

 

The RBI further said that UPI transactions would remain free for users, both for person-to-person (P2P) and person-to-merchant (P2M) payments. For merchants, P2M UPI transactions below ₹2,000 would continue to remain free of MDR. MDR may, however, be levied on merchants for P2M transactions above ₹2,000. The RBI said it remained committed to ensuring that UPI continues to be safe, seamless, affordable and accessible, while supporting the long-term sustainability and growth of India’s digital payments ecosystem.

 

New UPI MDR framework

 

The National Payments Corporation of India (NPCI), which operates UPI, on Tuesday said a MDR of 0.4 per cent would apply to person-to-merchant UPI transactions above ₹2,000. The fee would be capped at ₹300 for transactions of ₹75,000 or more.

 

Person-to-merchant (P2M) transactions up to ₹2,000 would remain free of MDR. Peer-to-peer (P2P) transactions, such as transfers between family and friends, would remain free.

 

Essential sectors such as railways, telecom and fuel would attract a flat ₹5 fee per transaction, while capital-market transactions would attract a lower rate of 0.02 per cent. UPI app providers have been barred from adding platform fees, while banks have been directed to ensure merchants do not pass on MDR costs to customers.